Lilly suffers stinging defeat in EU patent battle over Alimta

Eli Lilly ($LLY) suffered a crushing defeat in the U.K. over patents for its lung cancer blockbuster Alimta as the U.K. High Court ruled in favor of Actavis' plan to market copycat versions of the med.

The High Court's decision also applies to Actavis' generics in France, Italy and Spain. The ruling overturns an earlier one from the U.K. Court of Appeal that said Actavis would infringe on Lilly's Alimta patent by marketing alternative salt forms of the drug.

The company has a separate compound patent for the drug that expires in 2017. But certain patents for Alimta expire in 2021, and the latest ruling could throw a wrench in Lilly's plans to hold on to sales.

Unsurprisingly, Lilly is not pleased with the High Court's decision. "We strongly disagree with the ruling by the U.K. High Court" and "we plan to seek permission to appeal this ruling," Lilly's SVP and general counsel Michael Harrington said in a statement.

But the fact that Lilly has to ask permission to appeal the ruling means that "it's not clear that an appeal will be granted," Evercore ISI analyst Mark Schoenebaum said in a note to clients. Meanwhile, generics "can likely launch immediately in the U.K. and can launch in the other three countries once reimbursement discussions are complete," Schoenebaum said.

Alimta's combined sales in the U.K., France, Italy and Spain ring in at around $375 million, with $60 million of that in the U.K., Schoenebaum said. So Lilly has a lot riding on an appeal.

If Lilly did hang on to Alimta patents through 2021, it would have "a meaningful impact on EPS" because almost all of those sales would be "incremental margin," Bernstein analyst Tim Anderson said last year. A positive ruling could add nearly 10% to Lilly's per-share earnings from 2016 to 2020, Anderson said.

Still, Lilly could face a rough road ahead with Alimta in Europe. A German appeals court last year ruled in favor of Actavis, opening the door to generic competition in the country.

The company has fared better with Alimta in the U.S., though. In August, a federal court ruled in favor of Lilly and granted the company 5 more years of U.S. exclusivity for the med. The court found that generic meds proposed by Teva Pharmaceutical Industries ($TEVA) would infringe on Lilly's method patent for Alimta in combination with vitamins, allowing Lilly to hold on to the patent until 2022.